This sovereign rating, restated from the
Ratings Report indicated above, is issued by The Economist Intelligence Unit
credit rating agency, registered in accordance with Regulation (EC) No 1060/2009
of 16 September 2009, on credit rating agencies, as amended, and is issued
pursuant to such regulation.

The sovereign risk rating remains at BB rating. A pro-cyclical and highly accommodative fiscal stance, a constraining structure of public spending and a volatile political environment underlie the rating. Strong economic growth momentum and low levels of public debt contribute positively to the score.

Currency risk

The currency risk rating remains at BBB. Our relatively favourable outlook for the rating rests on our expectation that the deflationary environment of recent years has definitively passed, allowing the National Bank of Romania (NBR, the central bank) to raise interest rates, supporting a stronger a currency. Domestic and international political and policy volatility, however, are headwinds.

Banking sector risk

The rating is at BB. Banking sector resilience has improved in recent years owing to actions taken by financial institutions and an improving economic environment. Notably, the ratio of non-performing loans (NPLs) to total loans has fallen sharply, from more than 22% in early 2014 to 5.7% in June 2018 (latest available IMF data).

Political risk

The political risk rating is at BB. However, political risk will remain elevated in 2019-20. Tensions exist between political actors pressing for the effective implementation of the rule of law and the separation of powers, and those looking to prevent such developments.

Economic structure risk

Romania’s BB rating reflects structural vulnerabilities, such as persistent current-account deficits, moderate real GDP growth volatility, modest vulnerability to external shocks due to Romania's still large (albeit declining) external financing requirement and the need for some further reforms in the regulatory system.